The latest data on homebuilder sentiment shows a sharp downturn in confidence during November with the NAHB’s housing market index falling by the most in 8.5 years. And recent earnings from one of the country’s most prominent homebuilders isn’t going to bolster sentiment in the space.

On Tuesday, Toll Brothers (TOL) called out weakness in California, the company’s highest revenue state. “California has seen the biggest decline,” Douglas Yearley, Jr., chairman and chief executive officer at Toll Brothers, said in the company’s quarterly earnings release. “Significant price appreciation over the past few years, fewer foreign buyers in certain communities, and the impact of rising interest rates all contributed to this slowdown.”

A Toll Brothers housing development is shown in Carlsbad, California, U.S., May 21, 2018. The company reported its first decline in orders in four years on Tuesday. REUTERS/Mike Blake

Yearly added, “In our fourth quarter, despite a healthy economy, we saw a moderation in demand. Fourth quarter contracts declined 15% in dollars and 13% in units compared to a difficult comp from one year ago. Fourth quarter demand slowed to a per community pace more consistent with FY 2016’s fourth quarter, which was still strong.

“In November, we saw the market soften further, which we attribute to the cumulative impact of rising interest rates and the effect on buyer sentiment of well-publicized reports of a housing slowdown. We saw similar consumer behavior beginning in late 2013, when a rapid rise in interest rates temporarily tempered buyer demand before the market regained momentum.” Bloomberg notes this was the first decline in orders for the company since 2014.

On a day that stocks got hammered, however, Toll Brothers held up relatively well, falling 1.6% while the S&P 500 dropped more than 3%. So far this year, however, shares of Toll Brothers are down over 30%.

With a slowdown clearly coming to the housing sector, the question then becomes how much an ailing housing market will hamper the overall economy. The crash in oil prices and the resulting impact on markets and the economy seen back in 2014-15 could provide a potential roadmap, and an encouraging one for those who see the current expansion sustaining itself.

Cullen Roche, founder of Orcam Financial Group, floated the idea Monday that in 2015 we experienced an “undercover manufacturing recession” in the U.S., but that the overall economy kept growing due to increasing diversity within the economy. In 2020, Roche posits, we could see a similar dynamic play out with housing serving as the point of stress.

Oil prices eventually recovered, President Trump was elected president and vowed to cut corporate taxes, and thus was born a new leg of the economic expansion and the current bull run for stocks.

Of course, the housing market — which comprises a little less than 14% of GDP — is a larger part of the overall economy than the oil and gas industry (the mining sector constituted just under 2% of GDP in the second quarter of this year). Comparing housing and the oil industry is clearly not an apples to apples comparison, but this can serve as a potential guidepost for how the economy has reacted to recent stresses in one sector.

And though many consumers get a large part of their net worth and purchasing power from the value of their home, the current downturn in housing does not point to an outright decline in home values, but rather a moderation in the appreciation of home values. As Yearly said Tuesday, “equity in existing homes is at an all-time high, providing significant liquidity for current home owners who want to upgrade to a new home.”

Workers, particularly those in the lowest tiers of the income distribution, also continue to see their wages rise at the fastest pace since the financial crisis. Neither factor sounds like one that would prompt consumers to drastically rein in their spending.

Though as we noted Monday, financial markets are currently pricing in a downbeat overall economic forecast. After a brief reprieve for markets around optimism for easier Fed policy and a resolution of trade tensions, Tuesday’s action suggests this trend is still in place.

Current dynamics in the bond market are raising concerns among some investors, with the recent inversion at the front-end of the yield curve — with the yield on two- and three-year Treasuries exceeding the yield on 5-year notes — raising worries about recession.

And the softness that we’re seeing in the housing market isn’t likely to put at rest many of the economic concerns we’re seeing expressed in markets. But if recent history is anything to go by, there is a path for a slowdown in a big part of the economy to potentially come and go without an outright contraction in economic growth following. Though the market, it seems, remains somewhat wary of betting on that outcome.

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Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland